Is Bojangles Stock Too Expensive?

In a report published Friday, Wells Fargo Securities analyst Jeff Farmer maintained a Market Perform rating on Bojangles Inc (NASDAQ: BOJA), after the company reported its 1Q results.

The company reported 7.9 percent growth in its 1Q system same-store sales. While this was in-line with its preannouncement in May, it was an impressing performance. The EPS for the quarter came in at $0.17, higher than the consensus expectation of $0.15. The beat was driven by better-than-expected profit flow-through on the high single-digit 1Q SSS performance.

The EPS estimates for 2015 and 2016 have been raised from $0.65 to $0.68 and from $0.74 to $0.75, respectively.

Analyst Jeff Farmer acknowledged Bojangles' "strong fundamental momentum" and said that the SSS and EPS estimates "could prove conservative in coming quarters." Farmer added, however, that the shares were trading at 15.9x 2016E EBITDA, or a 21 percent premium to the mean valuation of the three companies that represent "the most appropriate peers" - El Pollo LoCo Holdings Inc (NASDAQ: LOCO), Fiesta Restaurant Group Inc (NASDAQ: FRGI) and Popeyes Louisiana Kitchen Inc (NASDAQ: PLKI).